What will you remember the year 2018 for? Just do not say that it will be for the $700 billion worth decline of the crypto market. Last year, the crypto industry received enough criticism, thus “paying” for the record achievements it reached back in December 2017. But for its ten-year history, it seems to be doing quite well. By turning away from the industry now, one is risking becoming a parent who did not witness their child taking its first steps. We decided to recall the main “steps” taken by the crypto market in 2018.
Reasons to Be Glad for Bitcoin
Last year, Bitcoin celebrated its first anniversary—ten years from the date of publication of the white paper. Many members of the community sent their congratulations to Bitcoin on October 31, including one of the founders of the cypherpunk movement, Timothy May, and the creator of the darknet Silk Road platform Ross Ulbricht.
The first Bitcoin transaction (and many subsequent ones) took place on the Lightning network. On December 27, 2017, shortly after testing the protocol, one of the Lightning developers paid to top up his mobile in the Lightning core network using the Bitrefill service. “Speed: Instant. Fee: Zero. Future: Almost Here,” as he wrote on Twitter. In January, Reddit user btc_throwaway1337 reported on the implementation of the “first Lightning transaction,” when he bought a VPN router from a provider, TorGuard. We can say that he really became the first “regular user” who bought a product through Lightning. Over the year, the network of channels for micropayments in Bitcoin evolved significantly and is constantly being improved by several development teams. One of the latest proofs of Lightning’s power today was the anti-auction arranged by the artist Cryptograffiti when he sold his work to the one who could pay the least sum in the shortest time. The purchase amount was one hundred billionth of a Bitcoin (about $0.000000037 at the time).
The 17-millionth Bitcoin was mined. The new million milestone was crossed on April 26, 2018. To date, there are 17,462,825 Bitcoins in circulation, which is about 83% of the total Bitcoin supply, which, according to estimates, should be reached by May 2140.
A critical vulnerability in the Bitcoin code was discovered and fixed without damaging the network. The vulnerability, called CVE-2018-17144, was reported to Bitcoin developers by an anonymous user in September 2018. Before this, it existed in a code that went unnoticed for a year and a half since the release of Bitcoin Core version 0.14.0. It could lead to a DoS attack on the network and Bitcoin inflation. The developers of Bitcoin Core released an updated version of the software, and the exploitation of the bug was not reported.
Nasdaq is preparing to launch Bitcoin futures. Bloomberg was first to report the news on November 27, citing internal sources. In December, Joseph Christinat—vice president of Nasdaq’s media team—confirmed the information, saying that the exchange was awaiting the decision of the Commodity Futures Trading Commission (CFTC) and that the futures must be launched in the first half of 2019.
Reasons to Be Glad for Others
Ethereum postponed the activation of the difficulty bomb and (so far) avoided hard forks. Last year was intense for the Ethereum community, as among developers, there were heated debates about changes in the code, and the main newsmakers were still referring to the return of the lost funds, which, in particular, would help solve the problem of frozen Parity funds. Even planned changes were hotly debated, such as the Constantinople hard fork, which should be a new stage in the development of the network, and one of the main changes associated with it is the change of consensus algorithm (transition to a Proof-of-Stake). The software update, which had to take place on October 30, was postponed, and according to the latest information, the hard fork will occur in the middle of this month, at block 7,080,000. At the same time, users will see if the developers were able to come to an agreement and whether another “classic” chain, operating according to the old rules, would appear on the Ethereum network.
EOS completed its $4 billion ICO and launched a mainnet. The EOS token sale lasted 340 days and was a record for the amount of funds raised. Today, the token platform for creating dApps, one of Ethereum’s competitors, is ranked 6th by market capitalization.
In September, the parent company of Poloniex, Circle, teamed up with the Coinbase exchange to launch the USDC stable coin. Circle announced such plans in May. To date, USDC is being traded on more than 20 exchanges, including OKEx, Poloniex, Coinbase Pro, Binance, KuCoin, and Bitfinex, and an audit conducted in November last year revealed the company had enough cash reserves to back up the tokens it offered.
That’s Not All
Bitcoin Cash implemented a hard fork, breaking up into Bitcoin ABC (with the BCH ticker preserved on most exchanges) and Bitcoin SV. After a lengthy conflict between the developers, the network split into two chains on November 15, at block 556,767. Initially, only a software update was planned, which was prepared by the core Bitcoin Cash development team of Bitcoin ABC. Part of the community, however, did not support the planned changes and proposed an alternative code, which, in their opinion, was more in line with Satoshi’s vision (hence the name of the new chain—SV, Satoshi’s Vision). On the side of Bitcoin ABC was Roger Ver, and on the side of Bitcoin SV was so-called #Faketoshi Craig Wright. Apparently, the community of the “former Bitcoin Cash” will have to postpone the debate with Bitcoin and fight each other.
On January 26, the largest robbery occurred in the history of the crypto market as $533 million in the NEM cryptocurrency was withdrawn from the Japanese platform Coincheck. In U.S. dollar terms, this exceeded the amount of Bitcoins the Mt. Gox exchange lost (at the exchange rate at the time) by several million. Two days after the hacking, Coincheck management announced its readiness to pay damages to users, and in March, the exchange actually completed payments to all 260,000 affected users. In April, the acquisition of Coincheck by the Japanese brokerage company Monex was announced for $33.6 million. According to a local publication, the platform decided to change management to regain investor confidence.
Russia is working on the regulation of the crypto industry. On January 25, 2018, the Ministry of Finance published a bill on the regulation of digital assets, which defined cryptocurrencies, tokens, mining, and ICOs. On May 22, 2018, the State Duma adopted bills “On Digital Rights,” “On Digital Financial Assets,” and “On Attracting Investments Using Investment Platforms” in the first reading. The Ministry of Communications, RACIB, some other ministries, and the central bank made various proposals in this area. Doctor of Law and Director of the Center for the Digital Economy and Financial Innovations, Elina Sidorenko; formerly Advisor to the President on Internet Development Issues, German Klimenko; as well as journalist and crypto investor Maxim Rubchenko all shared with DeCenter their thoughts on the cryptocurrency and blockchain regulation in Russia.
The U.S. Securities and Exchange Commission (SEC) did not approve any of the ETF applications. Attempts to launch Bitcoin ETF began in 2013, and by the end of 2017, the SEC was expected to consider applications from companies such as Cboe, REX, Proshares, and VanEck. All this time, however, the SEC either rejected applications or postponed its decision, citing concerns about the liquidity and volatility of the “basic instruments” in which the funds are going to invest. Bitcoin’s fate should have been decided many times in July (the SEC once again rejected the Winklevoss brothers’ application), in August (the SEC had to settle on the Cboe application in partnership with VanEck SolidX Bitcoin Trust ETF), in September (also on Cboe VanEck). According to the latest information, the SEC is going to make a decision on the joint application from Cboe and VanEck before February 27, 2019.
Venezuela is launching a national cryptocurrency. On December 3, 2017, the President of Venezuela, Nicolas Maduro, announced the decision to start the Petro—the national digital currency backed by oil. The United States imposed sanctions on it; the National Assembly of Venezuela opposed its launch; the presale and main round of the ICO of the Petro held in February to March 2018 raised many questions. The people of Venezuela could not buy the national cryptocurrency for the bolivars, as only dollars and euros were accepted for payment along with Bitcoin and Ether. Besides, doubts were expressed in the reality of the figures that Maduro had declared. According to him, they managed to raise $735 million already on the first day of the presale, and this stage was completed with an indicator of $5 billion. Despite all the suspicions, however, Venezuela so far shows only progress in the development of the Petro project. Citizens’ pension savings were already transferred to the national cryptocurrency, and some banks started to display customer balances in the Petro. This year, the country plans to begin selling oil exclusively for the Petro, and on October 29, 2018, the Venezuelan Economy Department announced that it was possible to purchase the national crypto through the state treasury or six government-approved stock exchanges.